Last quarter of 2011 was -0.2%. those who know me will know that we have been pessimistic since May last year. We expected things to turn down, based on the early indications that our market had slowed. We seem to be a canary, picking up early signals.
So, why the decline. Well firstly lets admit that it’s not uncommon to see a smaller dip after the first recessionary dip. The reason is cutbacks. When a recession comes, companies, consumers and governments cut back. Especially governments. their spending is based on a plan that assumes normal growth, when a recession comes the trend can resume, but the line is now at a lower level, so they have to cut back. Whilst we started from a negative position before this recession, this one is not really that different. Cutbacks cause a second blip.
But, overall, history tells us the second blip is short and less deep. So, we expected it, based on the history, but lets not feel too bad about it.
Also, there was bad news in 2011. The Libyan war was bad news. Whilst in the end it was not too bad, it felt as if we were involved in another major war for a while. Pessimism makes for bad economic news.
Then tax increases and high inflation with low wage rises are taking real spending power away from the real economy.
Lastly was the Olympics. Those who got tickets, paid for them in Q4. I’ve heard, but don’t know if its true that the income for tickets will actually go in to Q3 2012 figures, but even so, it reduced the amount people had to spend on other things in Q4 2011.
So, what for the future?
I am 50/50 about the prospects for Q1 2012, even perhaps mildly optimistic.
There is less bad news around it seems to me. My feeling is that there are jobs being create. We have two new employees, and I hear of new ones being taken on at firms I know. Overall, with business people I meet, it is positive.
So, I expect Q1 2012 to be flat ish, with a bounce back in Q2, and good growth in Q3.
With the Jubilee, then the Olympics, then a massive Q3 GDP boost, expect Q4 to feel like the recession is finally over, and we can stop walking up the down escalator.
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Completely with you. We’ve had one quarter of very small decline at the end of last year, but I’m picking up the fist small signs of more optimism now. It might be that Q1 is also just a decline – in which case technically we’ll be back in recession, but at the moment I think we’ll avoid that and avoid recession, and even if it is, I feel it will be short and things will pick up in Q3.
That’s all unless the Euro goes POP of course. Then what happens is anybody’s guess as we don’t seem have the foggiest idea of how it will happen in practice – and there could be all kind of massive upheavals including significant public unrest and even European countries battling with each other politically and economically if not physically.